New Imperatives in Energy Decision-Making: The path to net-zero will include both technological and regulatory disruption

Posted on Wednesday, July 14, 2021

Author: Robert Hornung

Robert Hornung

Advisory Council Member, Positive Energy
President, Canadian Renewable Energy Association

From Monday, May 31 to Thursday, June 3, 2021, Positive Energy hosted Roles and Responsibilities and Canada’s Energy Future in An Age of Climate Change, a virtual conference exploring the roles and responsibilities between and among public authorities making decisions about Canada's energy future in an age of climate change. This blog is an adaptation of the speaker’s remarks.

Canada’s commitment to net-zero greenhouse gas emissions by 2050 will require an energy transition of unprecedented scale and speed. At the same time, several disruptive technologies are poised to fundamentally transform the electricity sector. This combination represents a significant challenge for Canada’s energy regulators and our regulatory system will need to significantly evolve if we are to ensure a smooth transition to net-zero. Several challenges must be addressed. 

First, all stakeholders, including regulators, need greater policy clarity and certainty. This has always been a challenge in the climate change space, where our goals are often vague, high level or ill defined. These goals are also often not “shared” goals and can change with the election of a new government. Regulators cannot define these objectives. They must focus on managing risks and costs, and achieving assigned objectives in the fairest way possible, while maintaining a safe and reliable energy supply. Achieving net-zero will require policymakers and regulators to develop a clean and common understanding around policy objectives. 

Second, more needs to be done to enhance coordination, eliminate duplication and harmonize processes and timelines within different bodies, ensuring that they are complementary and not working against each other. Some progress is being made in this area. The case studies highlighted in Patricia Larkin’s study for Positive Energy spotlight some of the good work currently underway. 

Third, given the significant technological disruption underway in the electricity sector, it is absolutely critical to convene decision-makers, regulators and stakeholders to work together to understand and discuss the potential implications of these changes. This can help create trust and confidence in the process for everyone participating within it, build a common knowledge base for everyone working within the process, and provide everyone with a deeper understanding of the range of perspectives at the table. We need more of this engagement going forward. 

Fourth, we must do more to publish and share energy data — Canada is actually known as a laggard in terms of energy data — as good data will be vital in facilitating these conversations. We now have the technologies that allow us to accumulate increasing amounts of data, but we need to do more to share it, and be transparent about how we analyze it, to inform solid decision-making going forward. 

Fifth, traditional regulatory processes will need to evolve. The electricity system of the future is going to be much more decentralized, customer-driven, digitalized, and integrated than the electricity system of today. Some of the most disruptive technologies are coming fastest: distributed-energy resources, energy storage, micro grids and electric vehicles. Anybody who works in the electricity business is in the process of fundamentally reviewing their business model, trying to figure out what it looks like in the electricity system of the future. Everyone is going to have to modify and adapt, and regulators will have to do the same. 

Sixth, regulators will need to be resourced to manage the significant new investments in generation and infrastructure that will be required to move to net-zero. Most studies show Canada becoming increasingly reliant on electricity on the way to net-zero. It is commonly suggested that Canada will need to double its electricity production to help decarbonize sectors like transportation, buildings and industry. 

Seventh, while technological disruption is creating a more complex electricity system, it’s also creating a system that provides more options for energy services, whether the provision of energy itself, or the provision of reliability or flexibility in the system. More optionality means more opportunities to reduce costs. It is going to be imperative for regulators to ensure that frameworks are established that recognize the diversity of options available, clearly define the services that need to be provided and ensure that the mechanisms in place allow different service providers to be considered and compensated for providing those services. Do we build new transmission or pursue non-wires alternatives? All options must be on the table. 

While getting to net-zero represent a significant challenge — the challenge is not primarily technological. The real challenge is the establishment of policy frameworks, market frameworks and regulatory frameworks that allow us to capitalize on disruptive technologies and technological innovation to pursue the most cost-effective path forward. This challenge is not the responsibility of any single stakeholder. We are only going to get there by working together and we do not have a lot of time to do so. Now is not the time to be risk-averse.

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